What is Digital Transformation

If we are asked to think about one of the most used buzzwords in IT industry during the last decade, we can easily choose “Digital Transformation” as one of them.

There are multiple views and definitions of this term based on specific contexts of businesses and/or individual preferences. I also tried to understand this term and had multiple discussions with my colleagues and IT experts. The high level definitions/characteristics of Digital Transformation from various such discussions are summarized below:

- It is related to utilizing latest digital technology such as ML (Machine Learning), AI (Artificial Intelligence), Blockchain, Big Data, Data Lakes etc.

- It is related to real-time processing of data

- It is related to cloud migration & utilizing cloud native technology

- It is related to Data Science, Automation, IoT etc

- It is related to business intelligence tools & techniques to understand data in a better way

I would agree that all of these understanding are correct with respect to specific business contexts in which they explained this term to me.

In this article, I would try to demystify this term in simple words but first let’s go through few queries mentioned below (in italic):

“Do you/teams spend countless hours in data preparation (e.g in excel/ppt), review of data, approval of data before any review meeting with decision makers?”

“Do you have diverse IT systems but every decision making is based on excel sheets/ppt (created manually), as data from IT systems can not be used due to lack of confidence/accuracy?”

“Does your organization has multiple systems, every system reports different data points (for same parameter, at same time) and team spends lot of time reconciling the data from different systems rather to take decision based on data?”

If you can relate yourself to any of these sample situations above, you may guess “What Digital Transformation is?” and “What are it’s benefits?”.

Digital Transformation can be considered as the combination of two keywords “Digital Technology” and “Business Transformation”. We will discuss both of these term to fully understand Digital Transformation. I will describe these terms in reverse order.

To explain business transformation, let’s take a few real life examples such as “How often do you go to your bank now to make a transaction?” or “How often do you go to a travel agent for your hotel or ticket booking?”. The answers to these queries will help you to understand the meaning of Business Transformation. In simplest words, this term refers to doing the same business in a new, improved way to achieve higher business outcomes (i.e higher revenue, increased customer satisfaction, capability to take decisions quickly).

Before we discuss “digital technology”, there is one question which comes to every inquisitive mind: “Why do we only consider latest technologies while talking about Digital Transformation?”. I will share a couple of facts/estimates to explain this:

- Currently the population worldwide is ~7.7 Billion and the no. of interconnected devices is ~22 Billion. The number of interconnected devices is expected to be ~75 Billion by 2025 (*).

- ~2,500,000 Terabytes of data was created everyday in 2020 (*) and the size is increasing day by day.

- To manage/analyse this amount of devices or data, unlimited computing power and better technologies are needed.

So, if you have been hearing many new digital technologies in the last ~10 years, you may understand the reason for the same.

The use of latest disruptive technology brings ability to handle unlimited data, improved inter-connectivity between IT systems/devices and enormous computing power. Use of such latest technology expedites business outcomes or decisions. However, please understand that these new technologies are only a medium to business transformations and our focus should remain towards improving business outcomes.

With this understanding, we can now combine these two terms to define “Digital Transformation”: “This is a business transformation (i.e. a new improved way to do the same thing) to improve business outcomes using digital technology”. Business outcomes may relate to higher revenues, improvement in decision making capabilities, increase in customer satisfaction, saving cost/time/effort etc. Like any other business transformation, Digital Transformation also integrates use of technology, process and people to achieve higher business outcomes.

Digital Transformation has different meaning depending upon the need of an organization. The activities below may be considered as an example of Digital Transformation:

- Implementation of Office 365 in an organization.

- Implementation of CRM system (i.e. Microsoft Dynamics or Salesforce) in an organization

-Implementation of a ERP system in an organization

- Implementation of a Data Visualization/Data Science technology to improve business capability, estimation, projection etc.

-Implementation of Machine Learning to predict the product’s success based on the user’s behaviour

-Implementation of Artificial Intelligence to resolve any problem faster (and hence delight the customer & improve business)

-Implementation of Cloud technology to manage fluctuations in demand, increase reliability of business applications and save costs

-Implementation of Robotics on a workshop floor to reduce time to market (TTM).

- Implementation of IoT in Autonomous vehicles

In brief, any such project/activity is Digital Transformation where you are expecting improved business outcomes using digital technologies This does not necessarily mean the usage of latest technologies such as AI, ML, Big data, cloud etc.

I would try to give some further insight from different perspectives:

Customer’s perspective: Customer is the most important part of any business transformation and it can be considered successful only when customer sees the value in it. Many CRM service (Salesforce, Microsoft Dynamics etc) can give insight into customer relationship and ways to improve customer satisfaction. For example, customers do not need to wait for support agents nowadays. Instead, they can interact with chatbots (based on AI technology) to get answers to their queries faster.

Customers may also receive useful insight based on the usage of service and key recommendations to get added value for their money, by using latest business intelligence systems.

These can be implemented as part of Digital Transformation.

Business/IT Team’s perspective: Digital transformation is driven by business/IT teams frequently to make IT systems future-ready. There may not be immediate added value to end customers; examples of these are described below:

- Connecting diverse IT systems for communication and data consistency

- Capability to analyse unlimited data and shorter decision making time

- Making IT system intelligent & user friendly (less time/effort needed to input data)

- Increased reporting capability (less effort in preparing reports, more effort towards revenue generating activities)

Many organizations are reporting information such as digital revenues, number of digitally trained employees, number of digital projects etc to showcase its adaption/expertise of latest digital technology. This is a useful KPI (Key Performance Indicator) to remain competitive in today’s market.

Overall, I hope this article may clarify some of enigma around Digital Transformation. I would suggest you to consider “Business Transformation” before “Digital Technology” for simplicity & better understanding of “Digital Transformation”.

*Reference: statista.com, forbes.com